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Rosh Hashanah Respite?

The US House of Representatives is adjourned for the Jewish High Holiday of Rosh Hashanah and is not scheduled to be in session until Thursday at noon. In an ordinary year, little attention would be paid to this fact. As you've probably noticed, this is not an ordinary year.

After yesterday's stock market debacle, investors seem to be concluding that the interim will give House members a chance to cherrypick the defeated bailout proposal, keeping the least objectionble aspects, ditching the most objectionable aspects, and crafting their own credit market fix.

In the whirl of events, it's important to distinguish between the stock market (which investors and the general media sorta understand) and the credit market (which until recently attracted little attention from the general public and still is seen as a turbulent sea of esoteric question marks).

For instance, as of late morning today the stock market is behaving in a fairly jublilant fashion, posting a rebound of several percentage points. The credit market, however, is quite distressed. The benchmark overnight LIBOR (a percentage rate that many banks use in lending money to each other) jumped to 6.875% from just over 2.5%. This is the largest increase ever seen.

Without a Congressional fix, it is seeming less and less likely that the credit market and its implications for businesses large and small can get unstuck. For today, however, we can watch the stock market and the best way to do so is to watch the Wilshire 5000, which is more broadly based and in unsettled times is more likely to reflect the market as a whole than the Dow Jones Industrials. With any index, the percentage change is far more important than the point change. It is well to bear in mind, however, that every Wilshire 5000 point change involves about a billion dollars in market capitalization. So yesterday's freefall took over $800 billion out of stocks--more than $100 billion more than the bailout package that Congress and its constituents couldn't swallow. Other estimates go as high as $1.2 trillion. Investment and retirement portfolios, of course, take the bottom-line hit.